Dear Liz: My wife and I, ages 58 and 60 respectively, are both retired and collecting $3,500 a month in pensions. We have about $375,000 in two 401(k) accounts and owe about $75,000 on our home. Should we be thinking about estate planning? If so, who does this work and how much do they charge?
Answer: Unless your home is a mansion, you probably don’t have to worry about the federal estate tax, which currently affects only estates worth $5 million or more. After 2012, the limit is scheduled to drop to $1 million.
But you still need an estate plan. Most important, you need legal documents that can help others take over for you should you become incapacitated. Powers of attorney for healthcare and finances can allow someone you trust to pay your bills, make medical decisions and otherwise handle your affairs. Spouses typically name each other as their preferred agents, but you also need to name back-ups in case one of you dies or you’re both injured in the same accident, for example.
You also probably need a will to say who gets what when you die, and you may want to consider a living trust if the probate process in your state is particularly lengthy or expensive (as it tends to be in California). You can create all these documents yourself using software products such as Quicken WillMaker or Nolo’s Online Living Trust. If you want a little more guidance — and many people do — you should look for an attorney who specializes in estate planning. A simple will with powers of attorney will cost a few hundred dollars, while a living trust typically costs $2,000 or more.